LEGG MASON

HOW TO GENERATE ALPHA IN THE US MARKET

Tristan Camp, Investment Specialist

Brussels, February 2014

This document is for Qualified Investors. Not for use by Private Individuals.

CLICK TO EDIT MASTER TITLE STYLE

Contents

US Market Outlook

Legg Mason ClearBridge US Aggressive Growth Fund

Legg Mason Royce US Small Cap Opportunity Fund

1

US EQUITY VALUATIONS REMAIN REASONABLE

S&P 500 EPS and P/E Ratio

Source Bloomberg. Data uses trailing-12-month bottom-up operating earnings per share, as at 31 December 2013 TTM= Trailing twelve months. From JP Morgan Asset Management Guide to the

Markets® Q114.

2

11

16

21

26

30

40

50

60

70

80

90

100

110

de

c '0

3

jun '0

4

de

c '0

4

jun '0

5

de

c '0

5

jun '0

6

de

c '0

6

jun '0

7

de

c '0

7

jun '0

8

de

c '0

8

jun '0

9

de

c '0

9

jun '1

0

de

c '1

0

jun '1

1

de

c '1

1

jun '1

2

de

c '1

2

jun '1

3

de

c '1

3

TTM EPS (left axis) TTM P/E (right axis)

EQUITY RETURNS AND RISING RATES:

HIGHER YIELDS NOT ALWAYS A HEADWIND

Source: Standard & Poor’s, US Treasury, FactSet, J.P. Morgan Asset Management. Returns are based on price index only and do not include dividends. Data as at 31 December 2013. From JP

Morgan Asset Management Guide to the Markets® Q114.

3

LOWER CORRELATIONS FAVOR STOCKPICKERS

Source: Empirical Research Partners LLC, Standard & Poor’s, J.P. Morgan Asset Management. Capitalization weighted correlation of top

750 stocks by market capitalization, daily returns, 1926 – Dec. 31, 2013. From JP Morgan Asset Management Guide to the Markets® Q114.

4

REBOUND OF AUTO SALES DEMONSTRATES

RESILIENCE OF US CONSUMER

Source: US Department of Commerce: Bureau of Economic Analysis, as at 31 December 2013. From JP Morgan Asset Management Guide to the Markets® Q114.

5

8

10

12

14

16

18

20

22

24ja

n '9

4

mrt

'9

5

me

i '9

6

jul '9

7

sep '9

8

no

v '9

9

jan '0

1

mrt

'0

2

me

i '0

3

jul '0

4

sep '0

5

no

v '0

6

jan '0

8

mrt

'0

9

me

i '1

0

jul '1

1

sep '1

2

no

v '1

3

Light Weight Vehicle Sales: Autos & Light Trucks

HOUSING STARTS REBOUNDED SHARPLY AFTER

THE LAST TWO COLLAPSES

Source: Census Bureau, Zelman and Associates analysis, as at 30 September 2013. This information is provided for illustrative purposes only and does not reflect the performance of an investment.

Forecasts are inherently limited and should not be relied upon as indicators of future performance, or forecast of actual future events, or a guarantee of future results. From JP Morgan Asset

Management Guide to the Markets® Q114.

6

FUNDAMENTALS OF THE HOUSING MARKET ARE

HEALTHY

Sources: (Left) Census Bureau, J.P. Morgan Asset Management. Monthly mortgage payment assumes the prevailing 30-year fixed-rate mortgage rates and average new home prices excluding a

20% down payment.

(Right)Census Bureau, National Association of Realtors, J.P. Morgan Asset Management. From JP Morgan Asset Management Guide to the Markets® Q114.

7

US ENJOYS THE LOWEST-COST NATURAL GAS

PRICES IN THE LAST 6 YEARS

Natural gas prices in the UK and Europe are nearly three times as high as in the US, and LNG prices

in Japan and Northeast Asia are nearly four to five times as high as the US.

Source: Bloomberg, using month-end prices as at 31 December 2013. Japan LNG import price index updates on a two-month lag basis. From JP Morgan Asset Management Guide to the Markets®

Q114.

8

0

2

4

6

8

10

12

14

16

18

20

US 1M nat gas futures EU 1M nat gas futures UK 1M nat gas futures

Japan LNG Asia 1M LNG swap

FUND FLOWS HAVE JUST BEGUN TO REACT

TO POSITIVE EQUITY RETURNS

Source: Investment Company Institute, J.P. Morgan Asset Management.

Data include flows through November 2013 and exclude ETFs except for the bottom left chart. ICI data are subject to periodic revisions. World equity flows are inclusive of emerging market, global

equity and regional equity flows. Hybrid flows include asset allocation, balanced fund,

flexible portfolio and mixed income flows.

Data is as at 31 December 2013. From JP Morgan Asset Management Guide to the Markets® Q114.

9

LEGG MASON: BROAD INVESTMENT CAPABILITIES

10

Global fixed

income

Global

alternative

fund-of-funds

Small-cap

equities: US,

Europe, Global

Global

quantitative

equity

Japanese

equities

Global value

investing

Quality-focused

US equities Multi solutions

• Multi-Asset

solutions • Global sovereign

• Global credit

• High yield

• Emerging market

debt

• Absolute return

• Portable alpha

• Enhanced cash

• UK equity

• European

equity

• Emerging

market equity

• Global equity

• Global

sovereign

• Global credit

• Global high yield

• Global absolute

return

• SRI

• Micro-cap US

• Small-cap US

• Small-cap

Europe

• Small-cap global

• Global macro

• Event driven

• Relative value

• Small-cap US

• Mid-cap US

• Large-cap US

• Global equities

• ESG

• Energy MLP

Broad sector capabilities

Legg Mason delivers investment expertise through a selection of specialist, independent managers, each with a focus on

active management. Together they cover a broad range of global equity, fixed income and alternative investment strategies.

TWO DIFFERENT APPROACHES TO THE US MARKET

Source: Legg Mason, as at 31 December 2013.

11

Legg Mason ClearBridge US Aggressive Growth

Fund

Legg Mason Royce US Small Cap Opportunity Fund

Portfolio Managers Richard Freeman & Evan Bauman

Bill Hench & Buzz Zaino

Investment philosophy Sustainable Growth Turnaround situations

Inception date 20 May 2000 8 November 2002

Style Valuation sensitive Deep Value/Relative Value

Portfolio construction Concentrated (50 – 70 stocks) Diversified (250 – 300 stocks)

Market Cap profile Multi cap Small/micro cap (up to $2.5 b)

Risk profile High Beta (1.1 – 1.2) High Beta (1.2 – 1.3)

Investment horizon Very Long term (low turnover) Long term (low turnover)

Benchmark Russell 3000 Growth Index Russell 2000 Index

Stock selection Bottom up Bottom up

% in top-ten holdings 49.6% 7.1%

Fund size $1,501 $1,153 b

No. Holdings 62 298

Weighted average market cap $40.3b $1.36b

Domicile Dublin Dublin

Will do best in A lower growth environment Accelerating economic growth environment

LEGG MASON CLEARBRIDGE US AGGRESSIVE

GROWTH FUND: A FUND POSITIONED FOR A LOWER

GROWTH ENVIRONMENT

12

LEGG MASON CLEARBRIDGE US AGGRESSIVE

GROWTH FUND: SNAPSHOT

13

All cap growth portfolio of 50 – 70 stocks

Looks for names with secular growth characteristics

Concentrated portfolio – high conviction, low turnover

First quartile in its sector over all time periods

• Approximately $80 billion* in assets under management for

institutional and retail clients

• Managed over many market cycles with a legacy that dates back

over 45 years

• Co-ownership of products: management and investment

professionals are shareholders in proprietary products

• Offices in New York and San Francisco

37 years of investment

industry experience

Joined a predecessor

firm in 1983

BS from Brooklyn

College; MBA from New

York University

17 years of investment

industry experience

Joined a predecessor

firm in 1997

BS in Mathematics from

Duke University

About ClearBridge Investments

Portfolio Managers: Richard Freeman and Evan Bauman

As at 31 December 2013.There are differences between the US Domiciled Mutual Fund and the Legg Mason ClearBridge

US Aggressive Growth Fund including differences in the amount of assets under management, cash flows, fees and

expenses, and applicable regulatory requirements, including investment and borrowing restrictions. The past performance of

the US domiciled Fund is, therefore, not indicative of the future performance of the Legg Mason ClearBridge US Aggressive

Growth Fund. The US Domiciled Mutual Fund has been used to demonstrate the longer term track record of the investment

manager. This is a US domiciled and is therefore unavailable for investment outside of the US. Base 0 in October 1983

Strong Track-record of the 30 year Strategy:

Key fund features:

* As at 31 December 2013.

WHAT DIFFERENTIATES THIS FUND FROM THE

COMPETITION?

An original positioning

Provides exposure to a different type of growth stock, complementary to other growth propositions

An impressive long term track record*

The fund is 1st Quartile across all time periods.

The attention paid to valuation

The price you pay is critical to creating value for investors

The tenure of the management team

Richie Freeman has been running the strategy since inception, joined by Evan Bauman in 1996

A long term investment horizon

The fund boasts one of the lowest turnovers of its category

*Source: Morningstar as at 31 December 2013. Copyright 2012, Morningstar, In. All Rights Reserved. NAV to NAV with gross income reinvested without initial charges, but reflecting annual

management fees, based in USD for Class A Distributing SharesPast performance is no guide to future returns and may not be repeated.

Page

14

The ‘North America’ Fund Manager of the year award was won by ClearBridge Investments for performance of the Legg Mason ClearBridge US

Aggressive Growth Fund during 2012. It is a sub-fund of Legg Mason Global Funds plc (LMGF). It qualifies, and is authorised in Ireland by the

Central Bank of Ireland as an undertaking for collective investments in transferable securities.

SECTOR EXPOSURE RELATIVE TO RUSSELL 3000

GROWTH INDEX- LEGG MASON CLEARBRIDGE US AGGRESSIVE GROWTH FUND

Source: Legg Mason, as at 31 January 2014.

15

6,13

-11,99

-7,98

-5,67

-4,95

-1,99

-1,20

-0,53

-0,22

11,55

16,84

-15 -10 -5 0 5 10 15 20

6,13

-11,99

-7,98

-5,67

-4,95

-1,99

-1,20

-0,53

-0,22

11,55

16,84

-15 -10 -5 0 5 10 15 20

Fund Index Underweight Overweight

Health Care 33.33% 13.73%

Energy 12.00% 4.38%

Utilities 0.00% 0.24%

Materials 2.81% 4.49%

Telecommunication Services 0.00% 1.88%

Information Technology 22.80% 27.11%

Consumer Discretionary 14.20% 19.12%

Financials 0.35% 5.47%

Industrials 4.41% 12.57%

Consumer Staples 0.00% 11.00%

Cash & Cash Equivalents 10.10% 0.00%

10.10

-11.00

-8.16

-5.12

-4.93

-4.31

-1.88

-1.68

-0.24

7.62

19.59

-15 -10 -5 0 5 10 15 20 25

STOCK EXAMPLE: BIOGEN IDEC (BIIB)

• The oldest independent biotech firm: founded in

1978. $67bn market cap*. $7bn revenues*. No net debt.

• Dominant franchise: Biogen has a large number of

products in late stages of development (phase III),

including products for the treatment of MS and

haemophilia.

• Leading-edge innovation: During the third quarter of

2013, sales of Tecfidera an oral MS treatment reached

$286million, dwarfing analyst estimates.

• Growth in any environment: “a great balance sheet,

with $3 billion of cash, no debt, and significant cash

flows to continue to invest in research and

development”.

*Source: Bloomberg, as at 11 December 2013. For illustrative purposes only, not intended as a buy or sell recommendation.

Page

16

Source: Bloomberg, as at 31 December 2013.

S&P 500 rebased to price of Biogen as at 31 December 1991 ($13).

0

50

100

150

200

250

300

dec 91 dec 94 dec 97 dec 00 dec 03 dec 06 dec 09 dec 12

Biogen Idec S&P 500

Bought as IDEC

Pharmaceuticals on IPO in

1991; merged with Biogen in

2003

$

STOCK EXAMPLE: FACEBOOK

• Facebook is a unique franchise with high barriers to

entry and is only just beginning to monetise its mobile

base and its billion-strong user base in general

• The stock was probably the most hated newly public

company in history yet in the team’s view it arguably

has the most opportunity for growth of any technology

company they have looked at

• Facebook was initially priced at $38 but the team

started to get interested at around $20. The stock is

now up at $57

Source: Bloomberg, as at 16 January 2014. S&P 500 rebased to price of Facebook as at launch on 17 May 2012 ($38).

For illustrative purposes only, not a recommendation to buy or sell a security.

Page

17

0

10

20

30

40

50

60

70

mei 12 aug 12 nov 12 feb 13 mei 13 aug 13 nov 13

Facebook S&P 500

$57.2

Position initiated

FUND ANNUALISED PERFORMANCE LEGG MASON CLEARBRIDGE US AGGRESSIVE GROWTH FUND

Performance in USD

Source: Legg Mason, as at 31 January 2014. NAV to NAV with gross income reinvested without initial charges, but reflecting annual management fees, based in USD for Class A Distributing Shares.

Please refer to “Important Information” for additional details. Past performance is no guide to future returns and may not be repeated. *Sector: US Large Cap Growth Equity. Source for quartile

performance: Copyright - © 2014, Morningstar Inc. as at 31 December 2013. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar; (2) may not be copied or

distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this

information. For more information, visit www.morningstar.com.

18

1 month 1 Year 3 years 5 Years 10 Years Since Inception

(25/05/00)

Morningstar Quartiles* 1 1 1 1 1 1

LEGG MASON ROYCE US SMALL CAP OPPORTUNITY FUND:

A PURE EXPOSURE TO A RECOVERING US ECONOMY

19

LEGG MASON ROYCE US SMALL CAP OPPORTUNITY

FUND: SNAPSHOT

20

Diversified portfolio of small and micro-cap stocks.

Focus on stocks with the potential to rebound from temporary difficulties

Seeks to purchase companies trading at discounts of at least 30% and

preferably 50% to their estimated value

Provides exposure to an under-researched and inefficient asset class

• Primary focus on smaller-cap companies

• Over 40 years small-cap and micro-cap value investment

experience

• Seasoned staff of 33 Professionals

• Approximately $39 billion in total assets under management

as at 31 December 2013

• Wholly owned, independent subsidiary of Legg Mason, Inc.

since 1 October 2001

20 years’ investment

experience

BA from Adelphi

University

41 years’ investment

experience

BA from Fordham

University; MBA from

Columbia University

About Royce & Associates

Portfolio Manager: Bill Hench and Buzz Zaino Cumulative 5 years fund performance:

Source: Morningstar, USD, as at 31 January 2014. NAV to NAV with gross income reinvested without initial charges but

reflecting annual management fees. Past performance is no guarantee of future results and may not be repeated. Class

A Distr. (A) USD shares.

Key fund features:

SECTOR EXPOSURE RELATIVE TO RUSSELL 2000 LEGG MASON ROYCE US SMALL CAP OPPORTUNITY FUND

Source: Legg Mason, as at 31 January 2014

21

Fund Index Underweight Overweight

Information Technology 25.42% 17.98%

Industrials 19.41% 14.38%

Materials 7.88% 4.84%

Energy 6.59% 5.37%

Consumer Discretionary 13.05% 13.12%

Telecommunication Services 0.39% 0.80%

Consumer Staples 0.79% 3.57%

Utilities 0.00% 3.09%

Health Care 5.27% 14.11%

Financials 12.48% 22.75%

Cash & Cash Equivalents 8.72% 0.00%

8.72

-10.26

-8.83

-3.09

-2.78

-0.41

-0.07

1.22

3.03

5.03

7.44

-15 -10 -5 0 5 10

EXAMPLE OF CURRENT “THEMES”

LEGG MASON ROYCE US SMALL CAP OPPORTUNITY FUND

Source: Royce & Associates, LLC as of 31 January 2014. All stocks mentioned are for illustrative purposes only and are not a recommendation to buy or sell. These are the views of Royce and are

subject to change at any time without prior notice.

Page

22

Information Technology: Tech stocks are a major theme in the portfolio currently accounting for approximately 25% of the holdings. The fund owns mostly capital goods and semiconductor stocks which have underperformed in the last few years.

Financials: the Fund has increased its allocation to regional banking and mortgage finance related stocks over the last two years. Exposure to these stocks has however been pared back more recently as these stocks have generally performed well on the back of rising long term interest rates. Allocation to financials still makes up approximately15% of the portfolio vs. less than 11% 3 years ago.

Housing / Construction: The Fund has exposure to housing related names although this has been trimmed in recent months and currently makes up a little more than 10% of the portfolio: Home builders, building materials, decking providers, roofing names, REITs etc. More recently, the team have added back to homebuilders as the price of many of these stocks have sold off. The fund has more recently invested in non-residential construction stocks which is only in the early stages of a recovery.

Consumer Discretionary: Consumer related names including apparel and retail stocks make up approximately 14% of the portfolio.

Energy: Positions in this sector are poised to benefit from the shale energy boom in the US, representing over 6% of the portfolio. This category also includes some industrial companies and some materials stocks.

Industrials: The Fund is invested in several aerospace names, for example, which have benefited from a strong commercial aviation cycle.

PERFORMANCE LEGG MASON ROYCE US SMALL CAP OPPORTUNITY FUND

Annualised Returns (USD)

Source: Legg Mason as at 31 December 2013. Based in USD for Class A Shares. For sector figures: Copyright 2014, Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is

proprietary to Morningstar; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any

damages or losses arising from any use of this information. For more information, visit www.morningstar.com. Performance has been calculated on a NAV to NAV basis. Performance calculations

assume gross dividends are reinvested. Return information presented is stated in U.S. Dollars and is calculated using the share class indicated above, after all Fund operating expenses but before

sales charges. Past performance is not a guide for future results and may not be repeated.

Page

23

APPENDIX

24

ACTIVE SHARE/TRACKING ERROR POSITIONING LEGG MASON CLEARBRIDGE US AGGRESSIVE GROWTH FUND

Active share of a fund is a measure of the percentage of stock holdings in a manager's portfolio that differ from the

benchmark index. In other words, it’s a way to estimate how different a fund is from its benchmark.*

Source: Legg Mason, as at 31 January 2014. *Active Share and Mutual Fund Performance (Antti Petajisto – 2010). Active share is calculated by taking the sum of the absolute value of the

differences of the weight of each holding in the portfolio versus the weight of each holding in the benchmark index and dividing by two.

25

Fund

Diversified Stock Picks

Concentrated Stock Picks

Closet Indexing

Factor Bets

20%

30%

40%

50%

60%

70%

80%

90%

100%

0,0% 2,0% 4,0% 6,0% 8,0% 10,0% 12,0%

Active S

hare

Tracking Error (Three-Year Annualized)

Current Active Share - Tracking Error Positioning

PORTFOLIO CHARACTERISTICS LEGG MASON CLEARBRIDGE US AGGRESSIVE GROWTH FUND

Source: Legg Mason/Factset, as at 31 January 2014. Portfolio characteristics may change without notice. Index Russell 3000 Growth.

26

Portfolio Characteristics Fund Index

Value Factors

Harmonic P/E Ratio (Forecasted 12M) 15.83 18.53

Price/Book (Weighted Interquartile Average) 4.30 5.40

Price/Sales Ratio 4.69 3.89

Quality Factors

% EPS Growth Next 3-5 Years 18.89% 15.05%

Debt to Equity 0.40 1.30

Risk Factors over 3 Years

Standard Deviation 14.93% 12.87%

Tracking Error 4.65% 0.00%

Information Ratio 0.30 -

Beta 1.11 1.00

Market Cap

Weighted Median Market Cap ($bn) 18.46 45.91

Weighted Average Cap ($bn) 42.76 85.74

TOP 10 FUND HOLDINGS LEGG MASON CLEARBRIDGE US AGGRESSIVE GROWTH FUND

Source: Legg Mason, as at 31 January 2014.

27

Security Market Cap ($bn) % of Total Fund

Biogen Idec Inc. 74 9.07

Unitedhealth Group Inc 72 6.17

Comcast Corp 137 5.24

Amgen Inc. 90 5.15

Anadarko Petroleum Corporation 41 5.13

Forest Laboratories, Inc. 18 4.20

Facebook Inc 117 3.88

Sandisk Corp 16 3.85

Cree, Inc. 7 3.43

Vertex Pharmaceutical 18 3.26

Total 49.39

Total Number of Holdings 61

ACTIVE SHARE/TRACKING ERROR POSITIONING LEGG MASON ROYCE US SMALL CAP OPPORTUNITY FUND

Active share of a fund is a measure of the percentage of stock holdings in a manager's portfolio that differ from the benchmark index. In other words, it’s a way to estimate how different a fund is from its benchmark.*

Source: Legg Mason, as at 31 January 2014.

*Active Share and Mutual Fund Performance (Antti Petajisto – 2010).

Active share is calculated by taking the sum of the absolute value of the differences of the weight of each holding in the portfolio versus the weight of each holding in the benchmark index and dividing

by two.

28

Fund

Diversified Stock Picks

Concentrated Stock Picks

Closet Indexing

Factor Bets

20%

30%

40%

50%

60%

70%

80%

90%

100%

0,0% 2,0% 4,0% 6,0% 8,0% 10,0% 12,0%

Active S

hare

Tracking Error (Three-Year Annualized)

Current Active Share - Tracking Error Positioning

PORTFOLIO CHARACTERISTICS LEGG MASON ROYCE US SMALL CAP OPPORTUNITY FUND

Source: Legg Mason, FactSet, as at 31 January 2014. * Source: Royce as at 31 December 2013. Portfolio characteristics may change without notice.

29

Portfolio Characteristics Fund Index

Harmonic P/E Ratio (Forecasted 12 M) 18.46* 20.48*

Price/Book (Weighted Interquartile Average) 1.77 2.93

Price/Sales Ratio 1.51 2.85

Standard Deviation 20.27% 16.83%

Tracking Error 4.80% 0.00%

Weighted Median Market Cap ($bn) 0.96 1.53

Weighted Average Cap ($bn) 1.29 1.75

IMPORTANT INFORMATION These are sub-funds of Legg Mason Global Funds plc, an umbrella fund with segregated liability between sub-funds, established as an open-ended investment company with variable capital, authorised in Ireland by the Central Bank of Ireland as an undertaking for collective investment in transferable securities.

All investments involve risk, including the possible loss of principal. Past performance is no guide to future returns and may not be repeated. This information has been prepared from sources believed reliable but is not guaranteed by Legg Mason and is not a complete summary or statement of all available data. Individual securities mentioned are intended as examples of portfolio holdings and are not intended as buy or sell recommendations. Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial situation or needs of individual investors.

The value of investments and the income from them can be affected by changes in interest rates, in exchange rates, general market conditions, political, social and economic developments and other variable factors. Both funds invest primarily in one region or country, which means that they are more sensitive to local economic, market, political or regulatory events than other funds that invest in a broader range of regions.

Legg Mason ClearBridge US Aggressive Growth Fund:

The fund invests in fewer companies than other funds which invest in shares usually do. This means that the fund does not spread its risk as widely as other funds and will therefore be affected more if an individual company has significant losses.

Legg Mason Royce US Small Cap Opportunity Fund:

The fund buys shares in smaller companies. It may be difficult to sell these shares, in which case the fund may not be able to minimise a loss on such shares.

Before investing you should read the key investor information document and the prospectus, which describe the sub-fund's full objective and risk factors. These and other relevant documents may be obtained in a number of languages at BNY Mellon Investment Servicing (International) Limited, Riverside Two, Sir John Rogerson’s Quay, Grand Canal Dock, Dublin 2, Ireland, www.leggmasonglobal.com and the registered office.

For Belgium Investors the paying agent is JP Morgan Chase Bank, Brussels Branch, Boulevard de Roi Albert II, 1210, Brussels, RC Brussels 626,253.

Issued and approved by Legg Mason Investments (Europe) Limited, registered office 201 Bishopsgate, London, EC2M 3AB. Registered in England and Wales, Company No. 1732037. Authorised and regulated by the Financial Conduct Authority.

This information is for use by Professional Clients and Eligible Counterparties. It is not aimed at, or for use by, Retail Clients.

February 2014

This document is for Asset Managers, Fund Distributors and Authorised Intermediaries. Not for use by Private Individuals.

30